Variable Universal Life Insurance

Variable universal life insurance features a savings component that can rise or fall based on investment choices. A variable universal life policy also includes adjustable premium payments, tax advantages and lifelong coverage.

Rachel Christian, writer and researcher for RetireGuide
  • Written by
    Rachel Christian

    Rachel Christian

    Financial Writer and Certified Educator in Personal Finance

    Rachel Christian is a writer and researcher for RetireGuide. She covers annuities, Medicare, life insurance and other important retirement topics. Rachel is a member of the Association for Financial Counseling & Planning Education.

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  • Edited By
    Matt Mauney
    Matt Mauney, Senior Editor for RetireGuide

    Matt Mauney

    Financial Editor

    Matt Mauney is an award-winning journalist, editor, writer and content strategist with more than 15 years of professional experience working for nationally recognized newspapers and digital brands. He has contributed content for,, The Hill and the American Cancer Society, and he was part of the Orlando Sentinel digital staff that was named a Pulitzer Prize finalist in 2017.

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    Eric Estevez
    Eric Estevez, Independent Licensed Life Insurance Agent

    Eric Estevez

    Owner of HLC Insurance Broker, LLC

    Eric Estevez is a duly licensed independent insurance broker and a former financial institution auditor with more than a decade of professional experience. He has specialized in federal, state and local compliance for both large and small businesses.

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  • Published: August 6, 2020
  • Updated: May 8, 2023
  • 4 min read time
  • This page features 4 Cited Research Articles
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APA Christian, R. (2023, May 8). Variable Universal Life Insurance. Retrieved July 12, 2024, from

MLA Christian, Rachel. "Variable Universal Life Insurance.", 8 May 2023,

Chicago Christian, Rachel. "Variable Universal Life Insurance." Last modified May 8, 2023.

What Is Variable Universal Life (VUL) Insurance?

Variable universal life insurance is a type of permanent life insurance, or coverage that never expires so long as premiums are paid.

These financial products function as an investment and as insurance.

Policies combine the flexible premium payment options of universal life insurance with the investment choices of variable life insurance.

By law, each insurance company or agent is required to provide you a copy of the policy’s prospectus. This free document includes important information about the variable universal life policy, including fees and expenses.

Variable universal life policies build a cash value that can be invested into subaccounts, similar to mutual funds. This gives you the potential for above-average cash value growth when compared to other life insurance options.

Key Features of Variable Universal Life Insurance
  • Adjustable death benefit and premium payment options.
  • A cash value component and a separate death benefit for your heirs.
  • Gains in the cash value component are tied to investment choices you select.
  • Policies include administration, mortality and management fees.
  • Growth in the policy’s cash value is tax deferred.

How Does Variable Universal Life Insurance Work?

When you pay premiums to a variable universal life insurance policy, part of the money goes to the insurance company to cover fees and the death benefit.

The rest is invested into a sub-account of selected investments which grows your policy’s cash value.

You can borrow against or withdraw money from the cash value over time, or you can use it to cover future premium payments.

Keep in mind that unpaid loans and partial withdrawals may reduce your cash value, cause your policy to lapse or incur tax consequences.

How much money your beneficiaries receive when you pass away can vary, depending on how your policy is structured.

Elements of Variable Universal Life Insurance
Adjustable Premiums
If the cash value of your policy is large enough to cover costs, you can skip a payment or even stop paying premiums for a while.
Investment Choice and Risk
Variable universal life policies let you invest in underlying subaccounts with various investment options you select, such as stocks, bonds and mutual funds. This exposes you to market risk. If investments perform well, your policy's cash value increases. If investments underperform, your cash value can decrease.
Flexible Death Benefit
You may be able to adjust your death benefit coverage over time. You may be able to request a death benefit increase from the insurance company or make a lump-sum payment to boost the policy's cash value.
Tax Advantages
You can transfer money between cash value investments tax-free. Gains within your cash value also grow tax deferred.

There are two main types of insurance payout options for variable universal life policies: Level death benefit and face amount plus cash value.

A level death benefit offers a fixed payout to your beneficiaries after you die. This dollar amount does not vary. You know exactly how much money they will receive.

However, any money left in your policy’s cash value returns to the insurance company after you die.

Face amount plus cash value is also referred to as a variable death benefit. While the face amount stays consistent, your beneficiaries also receive the policy’s cash value.

This option sets aside more money for your loved ones, but at the cost of higher premium payments.


Benefits of Variable Universal Life Insurance

Variable universal life insurance can be attractive for people interested in a hybrid insurance-investment option.

These policies include other key advantages, too.

Other benefits of variable universal life insurance include:
  • A minimum guaranteed death benefit.
  • Flexible premium payment options.
  • The potential to earn higher than average returns compared to other types of life insurance.
  • Control over investments that grow your policy’s cash value.
  • Tax-deferred growth inside the policy’s cash value.

Disadvantages of Variable Universal Life Insurance

Variable universal life insurance isn’t right for everyone. These policies cost more than other options, such as term life insurance, which only provides coverage for a specific number of years.

It’s important to understand potential risks before purchasing a policy.

Drawbacks of Variable Universal Life Insurance
  • Cash value can decrease because of poor investment choices or market volatility.
  • Policies are more complex than other types of life insurance.
  • Higher fees. You may have to pay a mortality and expense fee along with fees for your investments and insurance.
Last Modified: May 8, 2023

4 Cited Research Articles

  1. Chorpenning, A. (2020, July 17). Understanding Universal Life Insurance. Retrieved from
  2. (2020). Permanent Insurance. Retrieved from
  3. U.S. Securities and Exchange Commission. (2018, October. 30). Investor Bulletin: Variable Life Insurance. Retrieved from
  4. Insurance Information Institute. (n.d.). What are the different types of permanent life insurance policies? Retrieved from